The majestic success of William Heinecke in Thailand

This post started off as a follow-up to The Story of EST Cola. Thought to have come across another story of a Thai company standing up to a multinational conglomerate, I started to research The Pizza Company. Its founder did refuse to fold to Pizza Hut and he is Thai. But in another way he isn’t. This is what happens when business acumen, opportunity and sheer luck align. The tale of an empire that helped shape modern-day Thailand.

Over the years, I heard a few references to the fact that The Pizza Company was the former Thai Pizza Hut. Having found the tale of EST Cola (‘the former Pepsi’) in a similar way, I was keen to investigate. All enquiry led to the fast food chain’s owner, a Thai national by the name of William Heinecke. Not exactly a typically Thai name, now is it?

More interested in go-karts than academia and with his mother’s writing skills under his belt, he convinced the editor of Bangkok World (later acquired by the Bangkok Post) to publish his column about karting. In exchange he would sell ad space, for a commission. Soon earning more than most full-time correspondents, his commercial talent was apparent. At 17 he was appointed as the paper’s advertising manager. When Bill graduated one year later, he was enjoying life in the Thai capital so much that he refused to move back to the US to attend college.

Heinecke set up business selling office cleaning, radio advertising and PR services. Not old enough to qualify for a bank loan, gear head Bill set up a scheme to raise money by means of sponsorship for his racing exploits. Inventive to say the least. In 1967 he cashed out and sold his business, immediately setting up a new venture. Named The Minor Group, itcheekily referenced his young age.

In the late seventies, pizza franchises took continental America by storm. Convinced that the trend could grab hold of Thai consumers, he opened the very first Asian Pizza Hut outlet in Pattaya. He knew the beach side town well from childhood sea-side weekends. With the Vietnam war over and American R&R visitors disappearing, he clearly needed to target the Thai middle class. Bill successfully did so by adding local flavors and ingredients to the recipes. In spite of leading to the domination of the pizza market, and later being copied by McDonald’s and KFC, it would lead to the first intense discussions between The Minor Group and Tricon Global International, license holder of Pizza Hut. Tricon considered the deviation from the standard menu a violation of the license agreement.

Motivated by his success, Heinecke embarked on new ventures. He started vertically integrating his business and moved into dairy production, churning out the cheese to top his own pies. He liked the franchising model so much that he landed additional licenses for Mister Donut, Swensen’s, Sizzler, Dairy Queen and Burger King. Launching Australian franchise Chicken Treat in Thailand, the relationship with the Pizza Hut franchisor turned sour. Tricon argumented that as a Pizza Hut franchisee, The Minor Group had access to strategic information about their other franchise: Kentucky Fried Chicken (KFC), which was in direct competition. Tricon promptly added global non-competition clauses to all international franchise agreements and tried to restrict all further restaurant ventures by The Minor Group.

Not only did Heinecke sue, The Minor Group immediately rebranded all of their 116 restaurants overnight to The Pizza Company, creating a new restaurant chain. The lawsuit was settled out of court and The Pizza Company retains a 70% market share of the Thai pizza industry, to this day.

This is where The Story of the The Pizza Company would have ended. Foreigner launches Pizza Hut in Asia, and creates new fast food franchise after a spat with the parent company. Interesting, right? Turns out that William Heinecke’s story is considerably more remarkable than that.

Childhood sea-side memory didn’t just bring about the first Pizza Hut restaurant in Asia, Heinecke was also particularly fond of a bungalow-style hotel his family visited often. When the little resort came into hard times in the late seventies, the son of a wealthy banking family started shopping the lease agreement for the hotel grounds around. Heinecke jumped at the opportunity. A price was negotiated and a bank loan secured. When the time came to transfer the lease to the bank, as collateral for the loan, nothing happened.

As the land was owned by His Majesty the King’s Private Property Office, Heinecke contacted this private investment arm of the Royal Family. The response was as sobering as it was unexpected: the lease had long expired because of unpaid rent. The Minor Group had been scammed.

Quite unusual for a foreigner, William Heinecke was granted a meeting with M.L.Usni Pramoj, representative of the King’s Private Property Office, son of a former prime minister and highly-regarded advisor to His Majesty the King. Turns out that there needn’t have been any kind of fee for the lease. It would have been given free of charge, as long as a fair amount was paid on a monthly basis. A new lease was negotiated, sealed by a hand shake on-the-spot. Legal action got The Minor Group the initially payed sum back, 15 years later.

The Minor Group invested considerably in the Pattaya property and eventually turned it into the Marriott Resort and Spa (now Avani Resort & Spa). In stead of a flat rate, The Minor Group converted the monthly rent into a percentage of sales. It was the start of a fruitful relationship between The King’s Private Property Office and The Minor Group. M.L. Usni Pramoj and William Heinecke became close friends.

As a result of the relationship, William Heinecke had the honor to meet His Majesty King Bhumibol on several occasions. The King’s dedication to Thailand and his great leadership inspired Heinecke and his wife to become a Thai citizens in 1991, and renounce their US nationality. The Royal Family and their investment arms would build up a 6% stake in The Minor Group.

The first hotel deal in Pattaya deal got Heinecke launched into the hospitality industry. The Minor Group started operating additional hotels, once again using franchises and licenses, some of them on the King’s land. Their initial successes were under the Marriott and Four Seasons banners. By now also active as a distributor for lifestyle brands, Minor added Gap, Banana Republic, Esprit, Bossini, Charles & Keith and Red Earth to the portfolio. Keen to make use of synergies, the hotels would typically feature an array of retail shops and restaurants.

By 1999, Minor had acquired 25% of the prestigious Regent Hotel at Rajadamri Road in Bangkok, also on Royal land. When Goldman Sachs tried to perform a hostile take-over, The Minor Group rallied against them. In spite of offering a lower price for the shares, Heinecke was able to convince shareholders not to sell to the US investment bank, as the hotel should be considered a sacred Thai asset. Goldman Sachs was only able to acquire 40%, which it later sold to Heinecke, who turned it into the Four Seasons Rajadamri.

In line with previous success, Heinecke launched his own luxury hotel brand: Anantara. One of the fastest growing Asia-based resort chains, it uses Minor’s tried and tested strategy of having third parties finance land (and other costs). Similar to franchising, the name and approach is licensed out and a management fee is payed to Minor. In 2015, the Four Seasons Rajadamri was rebranded to Anantara Siam.

Five decades since its inception, The Minor Group has a market capitalisation that runs in the billions of US dollar. They operate over 134 hotels in 22 countries, under Anantara, Avani, Oaks, Per Aquum, Tivoli, Marriott, Four Seasons, St. Regis, Elewana and Radisson Blu brands. The group owns over 17000 restaurant outlets featuring names as Pizza Company, Sizzler, Dairy Queen, Birger King, Thai Express, Bread Talk, the Coffee Club, Ribs & Rumps and Riverside. Other industries include lifestyle, real estate and manufacturing. Majestic, indeed.

“It’s the people who make brands, not brands who make people” – William Heinecke